Interim Results – September 2019 31 January 2020
Agenda 1. Group Overview and business update Gavin Hudson 2. Financial Results Rob Aitken 3. Segment Performance Rob Aitken 4. Forward look Gavin Hudson 5. Q and A IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 2
Today’s presenters Gavin Hudson Rob Aitken Chief Executive Officer Chief Financial Officer IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 3
Interim Results – September 2019 ▪ Operating profit of R1,278 billion , up from R315 million ▪ EBITDA at R1,586 billion , up from R703 million ▪ Headline loss improves to R314 million ▪ Revenue marginally down -1.5%, to R8,085 billion ▪ Operating cash flows of R1,478 billion, up from R1,076 billion (before working capital movement) IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 4
Operational performance Starch Sugar Property ✓ ✓ ✓ Operating profit : R305m vs Operating profit : R855m vs Operating (loss)/profit : R243m vs R305m in Sep 2018 R68m in Sep 2018 (+170%) (R6m) in Sep 2018 ✓ ✓ ✓ Adjusted EBITDA : R366m vs Adjusted EBITDA : R968m vs Adjusted EBITDA : R243m vs R359m in Sep 2018 (+2%) R790m in Sep 2018 (+20%) (R5m) in Sep 2018 Starch is a great business and a The sugar business offers ongoing Property business is turning the consistently strong cash generator efficiency and growth opportunity corner at pace • • • We have a significantly Accelerated completion of deals Leveraged market position and transformed the South African and cash collection quality sugar business • • Volume increase driven by the Deals recognised in the 6 months were 141,000m 2 vs 17,000m 2 • Zimbabwe remains a strong import replacement programme business but is plagued by • • Targeted client relations to re- Lower operational costs through Hyperinflation establish trust and commitment improved recoveries • Notable improvement in • Continued overhead cost Mozambique through higher local improvements sales and cost containment IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 5
Tongaat Hulett: a leading player in the sectors which we operate One of the largest Founded in 1893 portfolios of premier A leader in Starch & Glucose, Sugar, Ethanol, - 127 year history Commercial land in Cattle and Animal Feeds markets KZN/SA ~11.7k 4 ~10.5m ~1.7m Hectares of prime Starch Plants Tons of cane crushed Tons per annum in sugar commercial land (4) Per annum production capacity (3) >850k ~400k ~R11bn 13 Tons per annum in animal Tons of maize per annum Sugar Production Indicative fair value of feed capacity (3) processing capacity facilities (1) developable land (4) ~30k >R70bn 40m ~45k Employees Litres per annum in Economic development Hectares farmed (2) ethanol capacity (3) on land to date (5) IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY Notes: Unless otherwise indicated, operational data and company estimates as of December 2019. (1) Including Eswatini. (2) Miller-cum- planter (“MCP”). (3) Based on management estimates as at December 2019. 6 (4) Independent Valuation Report issued on 23 August 2019, valued as at 1 June 2019. (5) Based on internal calculation of investments on Tongaat Hulett land sold since 1990, as at November 2019.
Reasons to believe in Tongaat Hulett • Critical indicators are moving in the right direction – we are doing the right things to turn this 1 company around • We have stabilised and streamlined the business and continue rightsizing it for recovery and 2 growth • We are improving our governance and reporting processes, and rebuilding trust in Tongaat Hulett 3 • We continue focusing on cash flow improvement and deleveraging our business 4 • Our team is invigorated, committed and completely focused on the tasks at hand 5 • Tongaat Hulett remains a high potential business with a significant asset perimeter 6 IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 7
Progress to date Rebasing the business and closure Good progress with cash generation on the past • Cash flow targets will be met and exceeded • PwC audit findings are being by year end addressed • Achieved and exceeded first debt reduction • Making significant Progress on milestone (R610m vs R500m target) reporting and governance related • Advanced assessment of asset disposals issues • Equity capital raise initiated • Newly commissioned Mozambique • Continue working on Zimbabwe refinery achieved production targets hyperinflation and dividend extraction Significant internal culture shift Partnering for growth and transformation • • Uzinzo – empowerment farming enterprise Evolution to performance-driven culture launched • • Millco – restructuring of milling assets New Exco driving execution • • Propco – property strategy making New board and governance committees in place and delivering significant progress value • Kilimanjaro plans to increase cane • Remain focused on all stakeholder hectares by ~4000h and create 2000 relations additional jobs in Zimbabwe IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 8
Financial Results
Introduction To consider in reviewing our results: • Financial policies and frameworks strengthened and consistently applied • Restatements applied in the 2018 annual results were carried forward for the September 2018 interim results used in the comparatives • Restatements amended to provide for the split of profits between the two halves of the financial year • IFRS 16 and IAS 29 adopted IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 10
Financial features Revenue Operating profit Adj EBITDA Strong improvement R8,085 bn R1,278 bn R1,452 bn in operating profit Sep’18: R8,207 bn Sep’18: R315 m Sep’18: R1,092 bn Net finance cost Headline loss HEPS Hyperinflation R894 m (R315 m) (233) cents implemented for Zimbabwe Sep’18: R608 m Sep’18: (R354 m) Sep’18: (322) cents Operating CF before Borrowings Recovery countered by working capital No dividend R12,993 bn finance cost and net R1,478 bn declared monetary loss Sep’18: R12,588 bn Sep’18: R1,076 bn IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 11
Hyperinflation • IAS 29 Financial Reporting in September 2019 Hyperinflationary Economies As reported: Sensitivity 1: applied Sensitivity 2: Hyperinflation Hyperinflation + No hyperinflation + • Official inflation rate has increased + official rate parallel rate official rate (closing) to 350% (30 September) (closing) (closing) R ‘millions • Group comparatives have not been Revenue (external) 1,577 1,265 1,135 restated Operating profit 928 733 1,089 • EBITDA 978 773 1,101 Fair value movements especially susceptible to distortions Adjusted EBITDA 717 564 484 Segment assets 3,099 2,479 2,312 • Net monetary loss arises from local currency cash balances that are losing purchasing power • A parallel rate is potentially emerging Tongaat Hulett utilises the concept of adjusted EBITDA that removes any fair value adjustments to biological assets IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 12
Income Statement 6 months ended 6 months ended 12 months ended 30 September 30 September 31 March 2019 2018 2019 Operational progress, Restated hyperinflation, re- recognition of land (Unaudited) (Unaudited) (Audited) R' million deals Revenue 8 085 8 207 17 069 Cost of sales (5 353) (6 295) (12 447) Additional borrowings Gross profit 2 732 1 912 4 622 for Xinavane refinery, Profit from operations 1 278 315 1 207 repricing facilities, R167m forex loss in Net finance costs (894) (608) (1 361) Zimbabwe Net monetary loss (329) - - Profit / (loss) before taxation 57 (293) (152) Income tax (256) (57) (640) Hyperinflation erosion Loss for the period (199) (350) (792) of purchasing power of Basic and diluted loss per share monetary assets (235) (356) (948) (cents) IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY 13
Revenue Revenue (1) (Rbn) Commentary YoY • Zimbabwe sales volumes decreased – lower # % 2% (38)% 34% 362% 12% (1)% Change production, conscious management of supply • Mozambique benefited from new refinery, 8,2 8,1 recovery of local market sales volumes and export sales brought forward Sep 18 • Only one new land transaction in the period, as well as the re-recognition of historic deals Sep 19 • Sales volumes in Starch up 4.5% 2,7 2,6 2,6 2,1 1,9 1,6 0,9 0,7 0,4 0,1 South Africa Zimbabwe Mozambique Developments Group Starch IT’S A NEW DAWN, IT’S A NEW DAY, IT’S THE TONGAAT HULETT WAY Notes: (1) In addition to divisions shown separately this also includes eSwatini, Corporate and intra-company eliminations. 14
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